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Nearly two years after Brobeck, Phleger & Harrison’s demise, former partners will have a chance to get together again. But it won’t be a typical reunion. Brobeck’s bankruptcy trustee, Ronald Greenspan, is inviting the partners to a meeting at which he will propose a settlement agreement that would free the partners from litigation related to the firm’s collapse. Greenspan said Tuesday that a time and place for the meeting has not been set, but he expects it will be early next month. Greenspan has asserted in filings to the U.S. bankruptcy court in San Francisco that he intends to pursue claims against the former partners for allegedly taking distributions when the firm was insolvent. In a filing Monday, Greenspan said the partners had received approximately $285 million in distributions in 2001 and 2002. That’s how much the estate could request if the matter goes to litigation, Greenspan said. But he said the settlement proposal “is for a small fraction of that.” The $285 million includes approximately $3.2 million in contingent bonuses paid in 2002 on the condition that they be returned if the recipients did not stay with the firm through March 31, 2003. Brobeck shut its doors on Feb. 14, 2003. Greenspan said partners also owe $5.7 million in capital notes. In Monday’s court filing — a motion seeking approval of a settlement agreement with Clifford Chance — Greenspan detailed Brobeck’s financial straits in 2002 when former Chairman Tower Snow Jr. and other partners decided to join Clifford Chance. “The firm had a truly staggering level of leasehold liabilities and debt, amounting to $560 million of leasehold liabilities and bank debt exceeding $430,000 per partner,” Greenspan said. “This debt is claimed to have been used to fund capital improvements for empty and unneeded space that had little value to Brobeck and, in fact, appears to have been incurred to maintain partner distributions at expected levels despite the firm not having the cash to pay them.” Greenspan has offered all the partners an undisclosed settlement in which they would pay the estate a sum based on how much they received from the firm or owed it. “There is a substantial discount for accepting the settlement proposal earlier rather than later,” Greenspan said in an interview. “And the discount is based on the number of partners who agree to it.” Greenspan said he has been holding a series of presentations with groups of partners that have banded together. Last week, he held an initial meeting at the offices of Los Angeles’ Klee, Tuchin, Bogdanoff & Stern, which is representing the largest group of about 120 partners. The group has formed a steering committee, whose members attended the meeting along with their counsel. Other partners have hired separate attorneys. In addition to Klee Tuchin partner Thomas Patterson, the other leading lawyers in negotiations are Margaret Sheneman, a partner in the San Francisco office of Winston & Strawn who represents about 33 partners, and Cecily Dumas, of Friedman Dumas & Springwater, who represents another group. Patterson said Greenspan’s claims against the partners are based on an untested statute — a provision of the California Corporations Code dealing with recovery of distributions to limited liability partners. “The trustee seems to be taking the position that the partners are not entitled to be compensated for any of the work they did,” Patterson said. “It’s a very radical interpretation of that statute. “We believe the partners worked very, very hard and were entitled to be paid for the work they did,” he said. This is the fourth proposal Greenspan has negotiated with parties involved in Brobeck’s bankruptcy. He inked a $10.2 million deal with Morgan, Lewis & Bockius and a $2.85 million agreement with Citibank FSB. U.S. Bankruptcy Judge Dennis Montali has not yet signed off on those agreements but indicated that he would do so once they are recrafted. Greenspan also has negotiated with Clifford Chance, which recently upped the amount it offered to get out of the Brobeck quagmire from $3.75 million to $4.5 million. The firm did so to counter a $4 million bid by a group of 10 asbestos plaintiffs lawyers to purchase the Brobeck estate’s rights to sue Clifford Chance. In October 2003, a liquidation trust set up by Brobeck’s liquidation committee — comprising retired partners and longtime employees — sued Clifford Chance and Snow, alleging that they contributed to Brobeck’s collapse and seeking a minimum of $100 million in damages. In August, David McClain, of Oakland, Calif.’s Kazan, McClain, Abrams, Fernandez, Lyons & Farrise, led a group offering to buy rights to the litigation. His firm had represented the liquidation committee in the suit against Clifford Chance. McClain said Tuesday that the judge may establish an overbid procedure, and “if so, we will be contemplating bidding.” Greenspan said in his filing that he had given McClain’s group two days to respond to Clifford Chance’s bid, but it had not done so. According to Monday’s court filing, the other lawyers in the group bidding for the Clifford Chance litigation — dubbed the KM group — include Steven Kazan of Kazan McClain; Alan Brayton and Gilbert Purcell of Brayton Purcell; and Stephen Tigerman and Steven Harowitz of the Law Offices of Harowitz & Tigerman. Greenspan concluded that the Clifford Chance payment would be the better of the two deals for the estate. He said the offer by the KM group “was highly contingent” with all but $350,000 of the purchase price to be paid at the end of the Clifford Chance litigation five to eight years down the road. “The offer also contained a nebulous condition that the trustee ‘cooperate’ with the KM group in prosecuting the claims against Clifford Chance,” the court filing states. This was “intended to prevent the trustee from asserting that Brobeck was insolvent at the time of the events giving rise to the Clifford Chance action, despite the evidence that fully supports this position.” The trustee said the KM group’s offer also required the estate to give up recoveries it sought from the former Brobeck partners and employees. The trustee is seeking to nullify the liquidation committee’s transfer of rights to the Clifford Chance litigation to this group and to recover the $500,000 the liquidation committee paid to Houston’s Lanier Firm to pursue the litigation. A hearing on the Clifford Chance settlement is scheduled for Tuesday.

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